Nikkei edges up as machinery data supports; China caution continues

Reuters Staff

3 Min Read

* Sentiment buoyed by quickest rise in machinery orders in a
year
* Short-term macro funds selling reflationary stocks
* Metal shares weak on China demand concern
By Ayai Tomisawa
TOKYO, March 13 (Reuters) - Japan's Nikkei share average
edged up on Thursday morning after falling to a one-week low on
the previous day as strong machinery data supported sentiment as
far as metal shares, which remained pressured on persistent
concern about Chinese demand.
Japan's core machinery orders rose in January at the fastest
pace in almost a year, rebounding from a record decline in the
previous month.
Knock-on sentiment helped the Nikkei gain 0.2
percent to 14,865.90. On Wednesday, the index fell its most in a
month, by 2.6 percent, to its lowest closing level since March
4.
Investors are picking up shares battered by Wednesday's
fall, but gains may be limited because of caution over Chinese
economic growth as well as the impact of an April sales tax
increase on Japan's economy, traders said.
There is also concern that momentum sparked by government
reflationary policies is slowing, as shares of banks and real
estate developers - the policies' primary beneficiaries - have
risen less than the benchmark index, traders said.
"Short-term macro funds are selling reflationary stocks,"
said a senior portfolio manager at a foreign asset management
firm. "Japan's fundamentals are not bad, but they (reflationary
stocks) are the ones who contributed to the rally last year and
they (investors) want to take profits as macro data have been
disappointing."
Recent U.S. data have also been disappointing, regardless of
the impact of heavy snow, and concern about slowing Chinese
demand has dragged down commodity prices, the portfolio manager
said.
"Investors want to see if Japan's growth is intact before
they start chasing the market higher."
The real estate sector has dropped 18 percent since the
beginning of the year, while the banking sector has fallen 13
percent. Over the same time, the Nikkei has shed 8.7 percent.
On Thursday, gainers included exporters and index
heavyweight stocks. Sony Corp rose 1.0 percent, Honda
Motor Co edged up 0.6 percent and SoftBank Corp
added 1.0 percent.
Metal shares, hit heavily on Wednesday, were kept weak by
China concerns. Sumitomo Metal Mining Co was flat while
Dowa Holdings Co shed 0.6 percent.
Chinese industrial production and retail sales data for
January and February will therefore draw investor attention
around 0530 GMT.
The broader Topix index rose 0.2 percent to
1,209.42.
The JPX-Nikkei Index 400, a gauge comprising
firms with high return on equity and strong corporate
governance, advanced 0.2 percent to 10,942.17.